However, from Burkina Faso’s point of view, it is more useful to calculate the export
parity price valued at Ouagadougou, because we want to compare it with other cotton
prices in Liverpool and see if our export price is competitive, after adjusting for
shipping costs.
Also we want to compare it with local prices and determine whether there is an
incentive to export cotton to Liverpool or not.
For the cotton to be competitively priced, an importer, after paying shipping costs,
must find it cheaper or equivalently priced when comparing it to alternative cotton
imports prices in Liverpool.
Also, if the export parity price in Ouagadougou is higher than the local price of cotton
then it is worthwhile exporting to Liverpool, otherwise we might as well sell the cotton
locally.